According to their website, the PNC Solution Loan for Undergraduate (their private loan product) has increased margins on this loan effective July 14th, 2009. I am not aware of any advance notice provided by PNC to their school clients.
Here are the details:
- Previous: LIBOR + 2.25% to LIBOR + 8.00% (or actual rates of 2.70% to 8.45%)
- Current: LIBOR + 4.00% to LIBOR + 10.75% (or actual rates of 4.41% to 11.16%)
PNC is the third lender in the last 45 days to raise the margins on their private loans:
- Discover increased margins on their private student loans by 1.5% on their minimum and 3.0% on their maximum rate on June 1st (see SLA blog post here).
- In June, Citibank switched from a Prime Rate index to LIBOR-based index (3 months) which effectively led to an increase in their loan margins on their CitiAssist loan (see SLA blog post here).
SLA has updated their SLA Private Student Loan Ratings to reflect this significant increase in margins on the PNC loan.
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A few thoughts:
- PNC and Discover had the most aggressive (lowest) margins on private student loans prior to their recent changes, so these increases show a desire to "return to the pack" and not drive volumes duringthe peak lending season.
- As these recent increases demonstrate, schools need to be flexible in updating their lender lists. That is one of the real benefits of SLA's Private Student Loan Ratings as it provides timely updates based on the frequent changes in the marketplace.
- For those who hoped TALF would increase the supply of capital for private student loans while also reducing borrower's costs, it's not happening.
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